On January $1$ Year $1,$ Gordon Corporation issued bonds with a face value of $$70,000,$ a stated rate of interest of $6\%,$ and a $5-$year term to maturity. The bonds were issued at $98.$ Interest is payable in cash on December $31$ each year. Gordon uses the straight$-$line method to amortize bond discounts and premiums.

Which of the following shows the effect of the first interest payment and amortization of the premium or discount on the financial statements?

Balance Sheet Income Statement Statement of Cash Flows

Assets $=$ Liabilities $+$ Stockholders$$ Equity Revenue $$ Expense $=$ Net Income

A$.(4,200)(4,200)$ n$/$a n$/$a n$/$a n$/$a $(4,200)$ FA

B$.(4,480)(280)(4,200)$ n$/$a $4,200(4,200)(4,480)$ FA

C$.(4,480)(280)(4,200)$ n$/$a $4,200(4,200)(4,200)$ OA$/(280)$ FA

D$.(4,200)280(4,480)$ n$/$a $4,480(4,480)(4,200)$ OA

Multiple Choice

Option C

Option B

Option A

Option D